Are Knowledge Spillovers Driving the Convergence of Productivity among Firms?

This study evaluates the impact of knowledge spillovers on the convergence of productivity among firms. With the use of patent citation data, knowledge spillovers are decomposed into intra‐ and inter‐industry spillovers, and internal knowledge flows. The findings from this study suggest that each firm is converging to its own steady‐state productivity growth rate, which is conditional on the firm's R&D efforts and the intensity of intra‐industry spillovers it receives. Moreover, if technology followers and leaders invest equally in R&D activities, the followers will eventually catch up with the leaders because the former tend to be the ones who receive knowledge spillovers from the latter.